Can a Foreign Company Run Payroll in Israel?
Yes — but it requires either registering directly as an Israeli employer across multiple government agencies, or using an Employer of Record (EOR) or managed payroll bureau. Most foreign companies with fewer than 10 employees in Israel choose the EOR route due to the complexity of direct registration.
Step-by-Step: Setting Up Payroll in Israel as a Foreign Employer
Obtain an Israeli Employer Tax Number (Mispar Nikouy)
File Form 4436 with the Israeli Tax Authority (Rashut HaMassim). Processing time: 2–6 weeks. Without this number, you cannot legally withhold or remit income tax.
Register with Bituach Leumi (National Insurance Institute)
Separate registration required. Contributions are due monthly by the 15th of the following month. Employer rates 2026: 3.55% on salary up to ₪7,522/month, 7.6% on salary above.
Enrol Employees in a Pension Fund
Mandatory from the employee's 6th month. Employer pension: 6.5%. Employer severance insurance: 8.33%. Employee contribution: 6% (deducted from gross salary).
Process Monthly Payroll in NIS
All salary payments must be made in NIS by the 1st of each month. Each payslip (Tloosh) must include gross salary, all deductions, net pay, leave balances, and pension details — in Hebrew.
Submit Monthly Tax Remittance
Withheld income tax and Bituach Leumi contributions are due by the 15th of the following month. Late payment attracts indexation-linked interest and penalties.
Annual Reporting (Form 126)
File Form 126 with the Tax Authority by 30 April of the following year. Covers all salary payments, deductions, and employer contributions for each employee.
